Correlation Between Cogeco Communications and Visa

Can any of the company-specific risk be diversified away by investing in both Cogeco Communications and Visa at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cogeco Communications and Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cogeco Communications and Visa Inc CDR, you can compare the effects of market volatilities on Cogeco Communications and Visa and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cogeco Communications with a short position of Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogeco Communications and Visa.

Diversification Opportunities for Cogeco Communications and Visa

0.32

Correlation Coefficient

Cogeco Communications  Visa

Weak diversification

The 3 months correlation between Cogeco and Visa is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Visa Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc CDR and Cogeco Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cogeco Communications are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc CDR has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Visa go up and down completely randomly.

Pair Corralation between Cogeco Communications and Visa

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 4.44 times less return on investment than Visa. In addition to that, Cogeco Communications is 1.54 times more volatile than Visa Inc CDR. It trades about 0.01 of its total potential returns per unit of risk. Visa Inc CDR is currently generating about 0.08 per unit of volatility. If you would invest  2,058  in Visa Inc CDR on September 2, 2024 and sell it today you would earn a total of  953.00  from holding Visa Inc CDR or generate 46.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cogeco Communications  vs.  Visa Inc CDR

Cogeco Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cogeco Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Visa Inc CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Visa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogeco Communications and Visa

The main advantage of trading using opposite Cogeco Communications and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogeco Communications position performs unexpectedly, Visa can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Visa will offset losses from the drop in Visa's long position.

The idea behind Cogeco Communications and Visa Inc CDR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.